Elon Musk’s dream merger is a nightmare for SpaceX shareholders
But Tesla shareholders should be cheering on the combination, especially if they get paid a fat premium.
Elon Musk revealed during SpaceX's Q3 earnings call that SpaceX and Tesla are considering a merger, confirming long-held speculation on Wall Street. This potential union was met with enthusiasm from investors, with Tesla's stock rising 3.4% and SpaceX's soaring 7.8%, adding $155 billion in market cap. The proposed merger would bring together SpaceX's AI and tech projects, Tesla's EV sales, and their shared interest in innovative technologies.
However, a closer examination of the purported benefits of the merger raises concerns. Analysts argue that the merger would be extremely costly and dilutive for SpaceX shareholders. If Musk were to pay a 30% premium on Tesla's current market cap, SpaceX would need to issue nearly half of its shares to finance the deal. In return, SpaceX would receive only a minimal boost in earnings, as Tesla's profits are currently falling while SpaceX's are surging.
Even if SpaceX managed to achieve the growth necessary to deliver substantial returns, the merger would present a significantly more challenging path forward, potentially overshadowing other tech giants such as Alphabet and Microsoft.
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